tv Nightly Business Report PBS March 15, 2014 1:00am-1:31am PDT
report" with tyler mathisen and susie gharib. brought to you in part by -- thestreet.com. featuring stephanie link who shares her investment strategies, stock picks and market insights with action alerts plus, the multimillion dollar portfolio she manages with jim cramer. learn more at thestreet.com/nbr. nervous weekend. investors remain cautious ahead of a big vote in ukraine on sunday. as the market focuses on the possibility that tensions could quickly escalate. reputational damage. target warns its data breach could be worse than initially reported. and troubles deepen at general motors with respect to its recalled cars. what happens to companies when their brands get tarnished. and market monitor. our guest tonight is looking for bargains in this market, and he
has picks for your portfolios that he calls quote stupid cheap. all that and more tonight on "nightly business report" for friday, march 14th. >> good evening, i'm tyler mathisen and welcome. markets in the u.s. and around the world on edge again today, two days ahead of a referendum vote called by pro-russian regional leaders in crimea. the question whether to stay part of ukraine or secede and become part of russian yeah. moscow shipped more forces in and promised more in response to violent outbursts by protesters demanding the kremlin pull back its troops and heavy artillery. secretary of state john kerry was emphatic today in how the white house views this sunday's vote. >> the united states' position on that referendum, i must say,
is clear, and it's clear today. we believe the referendum is contrary to the constitution of ukraine, it is contrary to international law, is in violation of that law, and we believe it is illegitimate. and as the president put it, illegal under the ukranian constitution. >> steve sedgwick is in the ukraine capital of kiev and has more on how things are shaping up ahead of sunday's referendum. >> reporter: here in kiev and throughout the ukraine the country remains tense after talks failed. possible an nexation may take place on the 16th of march. john kerry said russia should have to look at the consequences from their actions, and he still believes the vote would be illegal. sergey lavrov foreign minister
of russia said the vote was legal and backed up by the u.n. charter that said there was a right of self-determination for the people of crimea. he offered some hope, though, by saying russia would not look to expand its military activity into the mainland east of the ukraine despite military maneuvers within the last 24 hours. i spoke late on to the economy minister of the ukraine who said despite the impact, he still hoped there would be a diplomatic solution brought about by western pressure and perhaps influential circles within russia as well. steve sedgwick for "nightly business report" in kiev. >> late thursday night, acting ukranian prime minister was in new york city after addressing the united nations security council and meeting with the ukranian american advocacy group. he was asked about sunday's referendum in crimea and how his government would respond if it passes as expected. >> [ inaudible ].
>> so what does ukraine do on monday? >> on monday? >> yes. after the results come out. >> [ inaudible ]. >> how? >> [ inaudible ] using all leverage from the international community, from our international obligations, and pressing on russia to stop. >> he also believes that a peaceful solution with kiev and moscow becoming real partners is still possible. so how does the world's best-known investor feel about the recent selloff in the market sparked by headlines like the crisis in ukraine? warren buffett says investors should stick with a long-term strategy. >> i would bet a lot of money that income from a diversified group of stocks will increase significantly over the next 20 years. so the headlines will not make any difference in that. stocks can go up and down. they always will go up and down.
but american business is is going to move forward over time. >> he also warned that another financial crisis like the one we had in 2008 will happen again but not for some time. and he said it won't happen the same way. well, there was no crisis on wall street today but stocks did end the session lower as investors braced for this weekend's referendum in crimea. on wall street, the dow fell for the fifth trading day in a row. this is something that we haven't seen in nearly two years. and the nasdaq wrapped up its biggest weekly decline in almost a year. by the closing bell, the dow was down 43 points, the nasdaq lost 15, and the s&p lower by 5 points. the latest now on the deepening troubles at general motors, including a new controversy over faulty air bags in gm cars that one safety group says are responsible for more than 300 deaths. phil lebeau has more. >> reporter: new allegations today that general motors should have done more to protect consumers when it comes to two models that are at the heart of
the current recall crisis for the automaker. the center for auto safety did ansis of crashes and accidents involving the chevy cobalt and saturn ion over the last ten years. according to the center for auto safety, there were 303 deaths linked to accidents where the air bag did not deploy. and again it's with just two recalled models. the center for auto safety says that general motors and ntsa, national highway traffic safety commission should have seen the pattern and issued a recall investigation. we reached out to this commission. it says three separate crash investigation, of those models where the gm air bags were not deployed turned up inconclusive results. it points out some of the factors involving these accidents need to be considered when somebody looks at the data as a whole. still clarence ditna who runs the center for auto safety says gm and ntsa should have done more. >> if they had done that when
this database was being built in the 2003, 4, 5 model years what they would have found was an increasing incidence of front seat occupant deaths where the air bag didn't deploy, and no one asked the question why are these air bags not deploying? let's look at the individual crashes. if they had done that we would have had a recall years ago and we wouldn't have the controversy we have today. >> reporter: we talked to general motors about these latest allegations. the can be says as knowledgeable observers know, fars, fatal analysis reporting system tracks raw data. without rigorous analysis it is pure speculation to attempt to draw any meaningful conclusions. one thing is clear. it is one more day where general motors is dealing with headlines and questions about the safety
of its vehicles. phil lebeau, "nightly business report" in chicago, back to you. well, the ratings agency is weighing in on the trouble at general motors. it says the biggest risk to this recall will be quote reputational. although direct costs associated with the recall are expected to be manageable and not affect the company's credit rating, fitch still says followup costs could add up. target warns the massive data breach could be worse than thought. in a regulatory filing, the target says the investigation is still ongoing and additional information could cause reputational damage and worsen its losses. up to now the company said 40 million credit card customers' data may have been comprised and personal information accessed on 70 million. joining us on his thoughts of what it will change for the public to change its perceptions of general motors and target is dean crutchfield.
welcome. up two circumstances here are very very different. but the common thread is a loss of trust between the customer and the company. when that happens what do companies do, what can they do to restore trust? and does it ever go back to where it was? >> it's a big question. and i think it's case-by-case. but if you actually look at this in the cold light of day, stocks don't have a memory recall button but the public does. so that's the big issue for them. how can they translate truthful information to the public so they can weigh up the options and make decisions as to what's happened. i think at the moment none of us can believe what's going on here. i think gm stands for ghastly mess. it's an absolute outrage what's happened. these are two major brands with major roles in our economy and major roles in our society. and both of them have a promise to customers to keep them safe, whether it's their data or their motor car. and both of them have failed abysmally in delivering that. >> so can they rebuild their
reputation? and if so, how long will it take? what do they have to do. >> to do this it's about providing information. right now the court of public opinion is outside waiting to come in. it's about the information that we deserve. target provided information, and now we're finding the numbers could be double. so that brings a lot of suspicion and concern as to what truly did target know? so we need to dig deeper. with gm it's a different case all together. because there's a possibility of coverup, which has more sinister implications. so the two big things that are risks for the company, one firms that go through deep crisis could lose up to 20% of their revenue based on research. but also their reputation takes a major slam. that can take a long time to get over. >> let's go back to the case several years ago of toyota and lexus where there were deaths involved and there was a belief that somehow foot guards in the front of the car were getting wedged under the accelerator and causing the car to accelerate.
it was a damaging damaging set of hearings. but now four years later, most people recall it dimly, similar case of audi some years before. those brands are maybe more popular today than they ever were then. >> and gm has been doing a great job with the new lineup of vehicles that it's putting on the market. i think that if they manage this well then yes, it will be in a sense forgotten, i doubt forgiven. the difference here we're talking about hundreds of people ease lives. far more scaleable. we're talking about 70 million people's data has been stolen. these are very large numbers of people who are not going to forget. target has affected every single customer that it's got. they're not going to be jumping for joy. g.m. will have a lot of concern and cautiousness from any customer approaching their business in terms of the vehicles they want to buy. this is trust that's been broken. >> dean, real quickly in 30 seconds or less, is there a corporate role model, somebody that was in this kind of situation and did everything
right as far as customers were involved? >> well, funnily enough the one example that everyone talks about is j and j and tylenol. but that's such an old case. but i think one firm that did it very well was over the lead paint and that was mchale. the ceo opened up 300 lines of communication with a team of 30 people all responsible to deliver the news and information. it worked very well. it worked very efficiently. but that's because they opened up all lines of communication. target and gm have not done that. >> dean, thank you very much. dean crutchfield of dean crutchfield associates. still ahead, president obama wants to crack down on for profit colleges to protect students and taxpayers. but it won't happen without a fight. we have that story next.
president obama is proposing some new rules aimed at keeping an tight lid on low pe performing for profit colleges which leave students often under a ton of debt and not ready for the high-paying jobs they've been promised. >> reporter: the for profit college industry is booming with some 4.5 million students taking career training courses in what has become a multibillion dollar industry. but the obama administration says much of the trillion dollars in student loan debt has been accumulated by students attiat at career colleges. federal dollars provide up to 90% of the revenue at some of the training schools. >> when that opportunity is leading to massive debt, the opportunity is leading to massive default rates, that's not opportunity any of us can be proud of. that's not fair to people trying to climb the economic ladder, not fair to taxpayers and frankly it's abusive. >> reporter: new gainful employment proposals from the department of education would penalize career-oriented
programs that produce graduates without training needed to find a job with a salary that will allow them to pay off their debt. schools for profit or not that don't comply would lose access to federal aid programs, currently about $30 billion a year. >> we want to see good actors, great programs grow and expand and serve more folks. but where the wrong thing is happening for both people and tax pays. >> reporter: the administration proposals drew a sharp reaction from the association of private colleges and universities. its member career schools have more than 3 million students enrolled. >> the reality is that as you look at the rule, this is really nothing more than a declaration of war against the private sector' involvement in delivery of post secondary education. while they might get some satisfaction that attacking our schools, the reality is the people who really get hurt are the students. >> reporter: two years ago a federal court threw out a similar proposal from the department of education. the final version of this new
plan could also face a legal challenge from private sector colleges and universities. for "nightly business report," i'm hampton pearson in washington. shares of ann inc. popped on better than expected,ings report. the retailer whose brands include ann taylor and loft posted earnings that almost doubled as gross margins improved and sales grew. the company also announced a restructuring plan. it will cut 100 corporate jobs. that will save about $25 million a year. shares rose more than 7.5% to $37.53. shares of general mills fell after the company warned that third quarter earnings will come in below forecasts. the maker of cheerios and yoplait yogurt blamed it on increasing competition from cheaper private label foods as well as negative currency effects. general mills releases its quarterly report on wednesday. ahead of that the stock was down almost 2.5% to 49.77.
cath light makes software that helps track health care costs. the company southerned to $39.80 the. cisco investigating whether some of its activity in russia and neighboring countries violated u.s. laws that banned bribes to foreign officials. the network equipmentmaker launched the probe at the request of fell regulators. the company doesn't expect its financial results to be materially wa
>> all we have to see is reports like general mills, coca-cola, proctor and cgamble, we're roll over in a lot of areas. next quarter's earnings aren't going to cut it. i see a correction starting right about now. >> chris, you call some of your choices tonight stupid cheap. but if i bought one of them, intel a few years ago, it might have been cheap but i'd have felt pretty stupid. why would i be smart today? >> well, i think that intel is a buy right now. obviously a few years ago what people were worried about has already been priced in. and that's their legacy business. sure, everybody knows that's a slow growth no growth business. it's got a rock of gibraltar balance sheet. it yields 100 basis points more than ten years. you're getting paid while you wait. what you're waiting for i think is exciting. that's in the mobile and tablet business. most of their competitors use
taiw taiwa taiwanese found rest. they do their own. they do cheaper smaller faster and cooler. that's the name of the game. they're starting off with android and google. eventually they may be with apple. so i'm looking for the stock to trade into the low 30s. >> let's move on to another one of your picks, harley davidson, which you say could be a baby boomer play. tell us why you like it. >> people say that demographics are wrong. i say 11,000 baby boomers retiring every single day, now all of a sudden they have the time and the money. and what do they want? they want to ride a hog. and my view on that is, you're going to see an explosion as far as the people who want it. plus the fact they've really restructured their manufacturing. previously they used to build inventory when nobody wanted to ride in the winter months. now all of a sudden they've got it streamlined so they can do it in the months they need to. a real plus for harley and should trade up 10, 15 points
over the next 18 months. >> some of your stocks are high concept. this is kind of low concept. fastenal which makes all kinds of fasteners. it's also kind of against your hypothesis because it sells at 32 times earnings. it's got a growth rate of 18%. my schooling tells me that when the p.e. is higher than growth rate you're looking for trouble. >> well, this one is an exception to the rule. but i think that what's attractive are stocks that are growing. anybody can manufacture profits by cutting. but when you have growth then you can get real numbers to show real numbers. then i think that we're seeing a multiyear recovery in the housing and construction business, fastenal is worldwide. and they really have little competition. because nobody wants to get into manufacture screws and bolts and nuts and hangers and things like that. so i see fastenal as a growth value play as opposed to the other two names. >> all right. chris, do you have any disclosures to make? >> yes. the firm owns all the stocks and
i own none of them. >> all right. thank you so much. have a grate weekend. >> thank you. >> chris bilson of global financial private capital. what does it take to produce a blockbuster video game? sony thinks it has the answer and is hoping for a billion dollar payoff. sony is hoping its new video game infamous second son will be a huge hit. it's spending nearly $100 million or production, marketing and advertising. that's more than many hollywood movies. josh lipton takes us inside the making of a blockbuster. >> reporter: think it costs a lot of money to make a blockbuster movie?
>> for all we know we may be able to patch you through to their security. >> reporter: try producing a blockbuster video game. one week from today sony will release infamous second son. its first big exclusive game for the ps 4 video game console. this is a third installment of a series that has been very successful for sony, and one that it hopes will help it continue beating microsoft in the console wars. making and marketing a game like this can require an enormous budget. >> a big budget game title right now will cost almost as much as a feature film. i mean, you can talk budgets from 50 million all the the way up to over $200 million for a specific title. >> reporter: it's a multiyear, massive undertaking to make these big budget video games. there can be up to 100 people working on a game for years. game developers, engineers and
artists, just for the music there were three composers and about ten musicians creating the soundtrack for infamous second son. there's also the marketing dollars that's put to work for these games. a analysts say that can cost another $30 million. but the payoff for these companies can be stunning. take two's grand theft auto 5 for example released just last fall has already done 1.8 billion in sales. analysts say the broader strategy for sony in releasing an exclusive title like infamous second son getting more gamers to buy its ps 4 console. sony says it has sold 6 million consoles. microsoft says it has sold around 4 million x-box one units. >> what's important about something like the second son or what's important about a title that is exclusive to the system is how will it help to drive the growth of the installed base. so from a perspective of the
category as a whole, you really need to see these exclusive titles come into the market, do well, drive traffic into stores and drive boxes out of the stores. >> reporter: while the movie industry makes big bucks, nothing is like what the video game industry has become. >> analysts tell me this is now a $100 billion industry. josh lipton, "nightly business report," san mateo, california. finally tonight, if you feel richer you may not be alone. there are now more millionaires than ever before in the united states. according to an annual study by the research firm spectrum group, the total number of u.s. households with a net worth of at least $1 million surged to more than 9.6 million in 2013. 600,000 more than the previous year. and the most since the group started counting ten years ago. good stock market, rising house prices and lower debt. >> but you know, this does not -- the thing that struck me, it does not include your home as part of the net worth. >> just liquid assets.
>> pretty incredible. that's it for "nightly business report" for tonight. i'm susie gharib. and again we want to remind you, this this is the time of year your public television station seeks support to make programs like "nightly business report" possible. >> and i'm tyler mathisen. on behalf of your public tv station thanks for your support. have a great weekend, everybody. we'll see you back here on st. patrick's day "nightly business report" has been brought to you in part by -- >> thestreet.com. founded by jim cramer, thestreet.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at thestreet.com/nbr.
amy: 11th-hour diplomacy stalls as the crisis in ukraine intensifies, while at home the c.i.a. is accused of spying on the u.s. senate. i'm amy walter in for gwen ifill tonight on "washington week." old war tensions escalate. >> the president has made it clear there will be consequences if russia does not find a way to change course. and we don't say that as a threat. we say that as a direct consequence for the choices that russia may or may not choose to make here. >> putin has already said we will respect the choice of the crimean people. >> can moscow be persuaded to stand down, or is